Jon Hooper: Innovators big drivers of job creation

Uber's success shows how new technology can disrupt an established industry. Photo / Bloomberg

Opinion

Young people need help to create their own futures.

A key result from EY's recent global job creation survey indicates that 65 per cent of those aged between 18 and 25 plan to run their own business at some point: 27 per cent immediately and 38 per cent after working for someone else.

One in four of the 2807 people surveyed has already started drawing up a business plan.

In part, this is driven by necessity. Releasing the report at EY's World Entrepreneur Of The Year competition in Monaco in June, global chairman and CEO Mark Weinberger estimated 75 million young people worldwide are unemployed.

"We need to harness the ambition and optimism displayed by youth or we risk a lost generation of young people, with long-term personal and economic costs," he said.

The usual barriers exist for these budding entrepreneurs. More than 40 per cent of survey respondents cited lack of access to funding and negative economic factors as significant constraints, while others mentioned competition (25 per cent) and lack of self-belief (25 per cent).

Of most value, said 39 per cent of respondents, would be guidance and support from today's entrepreneurs, such as hands-on internships and mentoring. But while 79 per cent of established entrepreneurs felt they were doing enough to support young people, only 36 per cent of these young entrepreneurs thought the support was sufficient.

As Weinberger sees it, there's an urgent need to plug this gap - for business leaders, established entrepreneurs and policy makers to offer young people the support they need.

For budding entrepreneurs, Weinberger's comments couldn't be more prescient.

Rapid technology advances are creating massive opportunities for people to disrupt legacy industries and start new, competing businesses with significantly lower cost and infrastructure than even five years ago. And they have the ability to connect with tens of thousands, if not millions, of potential customers.

Take Uber, for example - the service creating havoc within the traditional taxi industry in 300 cities and 58 countries (including New Zealand). With scant infrastructure, and charging customers only a fraction of its "bricks and mortar" competitors, Uber allows consumers with smartphones to connect directly with a driver.

Or Airbnb, a website for those wanting to rent out, or book, accommodation in private homes in dozens of countries. Needing none of the infrastructure of an established hotel chain, Airbnb is predicted to become the world's biggest hotel operator within the next five years.

It's all about innovation - about identifying a trend or a gap in the market and figuring out how you can connect customers directly with the services they're seeking.

The potential for rapid technological advances to disrupt established industries was the theme of a TIN (Technology Investment Network) Talk last week in Auckland by Salim Ismail, the former head of innovation at Yahoo who went on to co-found the Singularity University in Silicon Valley - an institution for hand-picked aspiring entrepreneurs whom he challenges to work on concepts with the potential to solve global problems.

As Ismail tells it, the disruption of traditional and established industries, made possible by "the digitisation of everything", is just beginning. Because their cost is falling, these technologies are becoming "democratised", he says.

For example, the technology behind Google's driverless car was initially priced somewhere north of US$300,000. Latest estimates suggest that by 2025 the technology will add between US$7000 and US$10,000 to the price of a car. By 2030 that is expected to drop to US$5000.

The Economist Intelligence Unit has also weighed in to the debate. A recent survey reveals more than 80 per cent of companies are seeing change in the way their customers access goods and services, and 51 per cent are in the process of changing how they deliver these goods and services.

And, as EY's 2015 Megatrends report notes, "Rapid advances in cloud computing, connected devices, mobile, social media and data analytics are prompting many companies to reassess fundamental aspects of their business ... "

Jon Hooper is the awards director of the Entrepreneur Of The Year programme in New Zealand. Photo / Supplied

Behind all this change are small start-ups, run by entrepreneurs. "If you try to innovate in a big company, its immune system will come back and attack you," Ismail says. "Big companies are built to resist change and withstand risk."

And it's in smaller companies and start-ups that jobs are being created.

The EY 2015 job creation survey reveals 47 per cent of entrepreneurs globally expect to increase their total workforce in the next 12 months, a figure that rises to 77 per cent among those who have competed in EY's Entrepreneur Of The Year programme worldwide.

These figures contrast strikingly with the hiring plans of senior executives in large corporates.

Another finding from the job creation survey is that entrepreneurs are powered by more than financial gain, with 31 per cent saying that leaving a positive legacy was the "top driver" in starting a business, outside of goals relating to turnover and profitability.

Other key motivations include making a positive contribution to the wider community (36 per cent) and inspiring others (32 per cent).

So what does this mean for New Zealand?

We have the ability to innovate and commercialise this innovation faster than ever before.

We have many natural advantages compared with more mature markets but we need to ensure we create the right platforms and incentives for innovation.

And we must challenge our thinking in areas like research, immigration and education.

A good case study would be to consider whether a startup such as Uber would have qualified for any government assistance here.

Of course, it may not have needed help, but it would be interesting to investigate.

The other part of being a global citizen is to become less obsessed with a company's place of residence or who owns it.

Rather, we need to take a more holistic view of the halo effect of innovative companies on the wider entrepreneurial ecosystem.

Several trail blazers who have already spawned a wider community of young entrepreneurs.

We must embrace and celebrate them and recognise the significant contribution they all make to our economic viability and prosperity.

Jon Hooper is the awards director of the Entrepreneur Of The Year programme in New Zealand.